Calculating Absorption Rates For Real Estate
Where our northern friends list their homes for the summer a lot of the southwest Florida real estate is listed in the fall. Those fresh real estate listings are going to be priced according to recent comparable sales and competing with real estate that is currently on the market.
A huge part of being successful when you list your home to sell it is in the preparation. Preparation isn’t just limited to the cleaning and decluttering process.
The real estate market has never been such a challenge to figure out for some sellers.
Simply sliding into the next season without a freshly updated market report is like going in blind folded and it can be a costly mistake. If your home has been on the market over the summer and you’ve not had the numbers crunched recently, it’s time.
Start from scratch and get a fresh take on the standing inventory, the current values and the absorption rate, which is the anticipated time on market.
To begin with, do you have any idea which price point is actually moving city wide or neighborhood-wide?
It sounds simple enough but there are many home owners that don’t realize that as of 5:30 a.m. Wednesday morning eighty percent of August 2010 closed sales in the Sunshine MLS were priced under $400,000. That's a pretty big number and it might be an important number to know, especially if you’re not priced below 400K and you’re wondering why your home hasn’t sold.
That’s the broad stroke of the brush that paints Collier County and south Lee County. The broad brush indicates that if your home is priced under $400,000 you may have an eighty percent chance of selling it … that is, until you drill down and review the market report for your specific community, price point or floor plan.
In order to get the most accurate snap shot of the market you need find out the most recent closed sales. Those folks that mad dashed their way to a contract to get their stimulus money probably closed sale over summer and they are your new “not older than three to six month old” comparables to base your listing price on.
If your home is currently listed for sale or you’re about to list it for sale you will want to have the absorption rate calculated, also. I am continually surprised by the amount of home owners who have their homes listed for sale and they have absolutely no idea what the estimated time frame to sell is.
Wouldn’t you think that knowing whether it could take a few months or a few years to sell a home is pivotal information? Especially for sellers that have to be somewhere else with a deadline.
If your real estate agent doesn’t know how, here’s how to calculate it yourself:
· Add together the number of Active/Pending/Active-Contract Listings 50
· Number of Sold Last Year 66 divided by 12 = 5.5 (rate)
· Number of Active (50) divided by the rate (5.5) = 9.09
· Absorption Rate = 9.09 months
Remember, listing inventory and even closed sales fluctuate so an absorption rate is not an exact science but a trend.
Now go forth and properly price your home for the selling season so you’re not still wondering why it didn’t sell next spring during the expiration season.
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Real Life in Bonita Springs is a project by Chris Griffith dedicated to writing useful blog posts for consumers about the Bonita Springs, Florida area. Find out what it is really like to live in Bonita Springs, Florida by reading about our fair city. You’ll get the latest in local real estate information, Bonita Springs real estate market reports and a little bit of humor. If you have topic ideas, feel free to request a story about the idea, after all, this site is just for you.
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